August 14, 2025 • 21 mins
Asian shares edged higher at the open, led by Japanese equities after the country's gross domestic product beat estimates. MSCI's gauge of Asian shares rose 0.2% as the Topix Index in Japan gained 0.8%. The country's economy expanded faster than expected last quarter, avoiding a recession. Stateside, bonds held their losses after higher inflation data caused traders to pare Federal Reserve interest-rates cuts, sending two-year Treasury yields higher by six basis points to 3.73%. A gauge of the dollar was little changed after gaining 0.4% in the prior session. Risk sentiment had been buoyed in previous days by expectations of monetary easing in the US, with traders fully pricing in a quarter-point reduction. But with US wholesale inflation accelerating in July by the most in three years, traders trimmed the odds of a September rate cut to about 90% from near certainty. We get reaction from Mark Luschini, Chief Investment Strategist at Janney Montgomery Scott.
Plus - traders in Asia will also focus on China's monthly data, which will help gauge the health of the economy as it battles a US trade war and the longest deflation streak since at least the 1990s. Worries of a deepening downturn are mounting, with expectations retail sales growth and industrial production slowed in July from the month prior, according to Bloomberg surveys. We check on the state of consumption in the Asia-Pacific with Matthew Driver, Executive Vice President of Services, APAC at Mastercard.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Bloomberg
day Break Asia podcast. I'm deg Krisner. The blistering run
in US equities kind of hit a wall on Thursday.
We had a spike in wholesale inflation and it kind
(00:21):
of caused markets to reduce bets on a FED rate
cut next month. Money markets now see about an eighty
five percent chance of a twenty five basis point rate
cut in September. That's after fully pricing in a rate
cut on Wednesday, and any notion of an outsized cut,
let's say fifty basis points, I think it's fair to
say that's been snuffed. And as we get set to
(00:43):
wrap up the week, we'll look at consumers in the
Asia Pacific. In a moment, I'll be joined by Matthew Driver.
He is executive vice president of services for the Apacket MasterCard.
But we begin here in the States, and as I mentioned,
US producer prices jumped into lie by the most in
three years, fueled by higher import cost as a result
(01:04):
of those tariffs. PPI month on month up nine tenths
of one percent, the annual rate three point three percent,
and services cost increased last month by one point one percent,
if you're wondering, that's the most we have seen since
March twenty twenty two. Joining me now is Mark Lushini.
He is the chief investment strategist at Janey Montgomery Scott.
(01:25):
Mark is on the line from Pittsburgh. It's good of
you to make time to chat with me. Let's talk
about this PPI print. What does it say about the
impact of tariffs on the economy.
Speaker 2 (01:37):
Well, then we're learning more as we get these data
releases that are beginning to show some signs of how
tariffs are manifesting in items that may ultimately feed into
the economy, either in the form of higher prices yet
to come, whether you call that attax or inflation, and
or the other side of it, and perhaps even the
(01:58):
darker side of it is to what degree it is
going to road consumer spending in a way that could
have a deleterious effect on economic activity.
Speaker 1 (02:06):
What about the extent to which it's going to begin
to compress margins. I'm sure for a person such as yourself,
that's got to be a concern most.
Speaker 2 (02:13):
Definitely, And we've heard a lot from companies here as
we're deep into the second quarter earning season about what
companies have done or attempted to strive to accomplish over
the last couple of months in terms of tariff mitigation measures,
and so for the most part, it hasn't really shown
up necessarily in the results, which so far in the
(02:34):
second quarter have been quite strong. But at the same time, though,
we know that some companies have stated that they are
going to be passing along costs, and to some degree
they have absorbed the cost. Now the proportion of which
is going to be either eaten by exporters and that
which is going to be eaten by importers and then
(02:57):
and we're passed along to consumers is still evolve. But
it would seem as though there's going to be some
margin pressure applied from these tarras that isn't going to
be able to fully pass along the consumers. That therefore
could have an impact on earnings as we go forward.
And given the rich valuations we have today in the
stock market, highly dependent upon not only positive economic activity
(03:20):
but the earnings growth that would be a bypartuct to that,
it's going to be very important to monitor as we
go deeper here into not only the third quarter, but
ultimately here from management in third quarter earning season.
Speaker 1 (03:35):
So today a number of economists were saying the report
is essentially a validation of the Fed's weight and see approach,
and the head of the FED Bank in Saint Louis,
Albertu Muslim was telling CNBC it's simply too early for
him to decide on whether to lower rates at next
month's FED meeting. Where are you in understanding what the
Fed may do, let's say, between now and the end
(03:57):
of the year.
Speaker 2 (03:58):
Well, certainly they're going to continue to be data dependent,
They've said as much, and so that leaves certainly before
their FMC meeting in mid September at least another CPI
print to come, another jobs report to come, and so
that and other obviously data in between. But importantly those
two will give further evidence as to what degree we
(04:21):
continue to see mounting price pressures coming from tariffs and
or obviously its impact on the job market, which is
in a somewhat delicate phosition as we speak, particularly given
the last print we had on jobs, which some have
suggested had the FED had that prior to their decision,
they may have already cut interest rates as a consequence.
(04:41):
So obviously, I think those two factors are going to
matter more than all the other data that, while be
interesting to note, will ultimately be the driver of the
Fed's decision as to whether they prioritize maintaining the job
market if it looks like it's stalling out, or conversely
combat inflation. If in fact, these price pressures appear to
(05:04):
be more than transitory, that could ultimately lead to some
unmooring of consumer expectations with regard to forward looking inflation prospects.
Speaker 1 (05:13):
I'm going to change gears. Today we learned that the
Trump administration is considering taking a stake in Intel. This
potential stake on the part of the government could support expansion.
We are told of Intel's domestic manufacturing. What is your
sense of the industrial policy that the Trump administration has
been rolling out. Do you think it's going to be
(05:35):
effective in certain areas? I know you're in Pittsburgh. We
just had a deal between Nipon Steel and US Steal.
The Trump administration was obviously involved in that, and I'm
wondering from your perspective whether you feel as though what
the Trump administration is putting forward in industrial policy will
have a material effect.
Speaker 2 (05:55):
Well I think it can have some positive benefits. I mean,
it's too soon to tell is going to happen between
the deal that was basically arranged by President Trump with
regards to Nippon Steel and US Steel, mostly to maintain
substantially all the operations in Pittsburgh as well as employment.
But at the same time, it is not necessarily unprecedented,
(06:19):
but rather uncommon to see this kind of industrial policy
being applied. We also saw it obviously with MP materials
relative to rare earth metals, and so this is kind
of a continuation of the same theme where there's the
strategic industries that President Trump and his administration have touted
our paramount to the success of the US and its
(06:41):
competitive state relative to other countries around the world, and
is trying to make specific surgical investments in industries and
or in companies in the case of Intel, which has
had some trouble from a financial standpoint, to perhaps meet
the obligation that it has committed to to underwrite the
(07:02):
facility in Ohio to produce semiconductors and the kind of
technological products that are necessary to once again keep the
US on the forefront of technology, but as well remain
competitive at a minimum on a global basis. So well,
you know, too soon to tell what may come of it,
but ultimately you would hope it would be a win win.
(07:23):
But it also invites a bit of a moral hazard,
which is to say, to what degree does this breed
an industrial policy that starts to actually impact the capitalistic uh,
you know, narrative that the US has embraced for so
many decades, if not centuries, relative to you know, the
interest of the companies and its shareholders and obviously its
(07:46):
ability to compete on a not only domestic but world
stage without heavy handed governmental influence. So it's obviously a
policy that everybody's watching closely. In the meantime, this is
just the latest example of something that's already know I've
been put forth in terms of MP materials and the
(08:09):
steel company's arrangements.
Speaker 1 (08:11):
So the equity market kind of stalled today. Nonetheless, the
S and P was able to extend a record high
nasdat comp very near to a record mark. Are you
still finding value in the equity market? I mean, we
could argue that, especially in the area of technology, some
of these valuations are pretty lofty.
Speaker 2 (08:29):
Well, it's more of a function of seeking relative value doug.
If you look at the S and P five hundred
in the aggregia as a capitalization weighted INDEXES trading it
called it roundly twenty two times forward earnings estimates, which
is on the richer side of where it's traded at
over say the last five years, which is closer to twenty,
(08:51):
or over the last ten, which is closer to eighteen
to nineteen. But you could say, well, given the concentration
in tech and tech adjacent companies, that's having a big
influence because their price earnings multiple is pulling up the
multiple the overall market. Again, the multiple for the Magnificent seven,
for instance, is approaching thirty times those same twelve month
(09:14):
forward earnings estimates. So what does that leave. That leaves
the S and P four hundred and ninety three. You
might say, well, they should be cheap or at least
offering good value, And there the answer is, relatively speaking,
yests trading it about nineteen times forward earnings as a group.
But at the same time, even then hardly an expensive
relative to you know, a typical market environment, which you
(09:36):
would expect, you know, sixteen or seventeen times forward earnings
for non tech related companies so I still think there's
an opportunity, particularly in the context of a market that
I still think is poised to continue to move higher
on the back of an economy that has perhaps experiencing
a bit of a soft patch, but I think has
(09:57):
some reason to believe is going to pick up a
bit of a tailwind as we get into the fourth
quarter of this year into twenty twenty six, particularly with
some of the provisions from the One Big Beautiful Bill Act.
And in addition to that, I think we've seen that
companies have done a pretty good job so far in
being able to handle the impact of tarrors by way
(10:19):
of all kinds of measures that they've taken to reorder
supply chains, seek operational efficiencies, and to some degree likely
to pass along some price hikes, but hopefully not so
much in the way that the consumer rolls over. But
collectively it leads me to believe that this market is
still very investable and buyable, because I expect higher prices
(10:41):
yet before the year is out.
Speaker 1 (10:42):
All right, Well leave it there, Mark, Thank you so
very much. Mark Lushini there. He is the chief investment
strategist at Cheney Montgomery Scott, joining from Pittsburgh here on
the Daybreak Asia podcast. Welcome back to the day Break
Asia Podcast. I'm Doug Chrisner. This morning in Asia, markets
(11:04):
are focused on the readings for Chinese retail sales and
industrial production. I think it's fair to say that recent
measures by Beijing to strengthen consumption reflect a growing recognition
of domestic demands pivotal role. Let's take a closer look
now at the consumer across the Asia Pacific. Joining me
now is Matthew Driver. He is the executive vice president
(11:25):
for Services in the APAC at MasterCard. Matthew is on
the line from Sydney. Matthew, thank you so much for
making time to chat with me. I know consumers across
the Asia Pacific are as varied as the economies themselves. Japan,
for example, is dealing with levels of inflation it hasn't
seen in decades. Other countries, as we know, are dealing
(11:45):
with very very different dynamics. But I'm hoping you can
speak to the overall level of consumer spending that you're
seeing across the APEC. What is it right now?
Speaker 3 (11:56):
Yeah?
Speaker 4 (11:56):
Sure, look, I think and thanks for hosting and having
me on the show. Look, despite the macro economic concertainty.
You know, consumer spending across a pack remains healthy. I
think that's driven by a couple of factors that are important.
You've really got low unemployment, You've had a decent amount
of real wage growth, and that's really helped to essentially
(12:18):
ensure that you've got demand across segments. I think our
Economics Institute forecast steady GDP growth.
Speaker 3 (12:25):
So what we are seeing is broad based. You know,
is the customer is pretty resilient.
Speaker 4 (12:30):
There's been a little bit of stress in some places
as rates have been higher for longer, but you have
to think about there are also some longer term drivers
that are going to be quite positive. Right. You've seen
interest rates are starting to come down number one. Number twos,
You've got some easing of fuel prices.
Speaker 3 (12:48):
That's point number two.
Speaker 4 (12:49):
And point number three is you know, goods continue to
be cheap. China's leaning into the region and so that's helping,
you know, on the value side as well.
Speaker 1 (12:58):
Do you have a sense of whether US tariff policy
has adversely impacted consumer sentiment in the region.
Speaker 4 (13:07):
Look, I think that you know, we're really trying to
think through you know, the impact of you know, towerists,
I think, look, it's a complicated environment, but look aga
specific continues to navigate that there are going to be
some alterations and adjustments. But also I think while those
dynamics post some challenges, they also understood that the region
(13:28):
is very resilient and adaptable, right. I think that post COVID,
some of the supply chains have become pretty flexible.
Speaker 3 (13:36):
That's been very very important.
Speaker 4 (13:38):
And while territs have raised input you know, import costs
to a certain degree and more price sensitive markets, there's
been you know, trying to I guess adjust you know,
consumer spending has been a little bit of value shifting,
like we talked about. But what we're really trying to
do is make sure that you know, we're helping our
(13:59):
customers navigate that with insights and intelligence. So I think
that despite some of that uncertainty, people are probably putting
off some of the longer term transactions, right, They're really
focusing on how do they enswer that they're driving value today,
shifting those patterns of spend a little bit. And so
with that in mind, and the fact, as I mentioned earlier,
(14:21):
we are seeing pretty steady demand and that's really reflecting
the resilience of the consumer overall.
Speaker 1 (14:28):
So I'm wondering about the challenges that MasterCard may be
facing right now, especially among the younger generations who may
prefer digital apps rather than the use of a credit card.
I mean, are you seeing the impact of that? Has
that presented something that you've had to address pretty specifically?
Speaker 4 (14:47):
Well, I think what you've got to realize is that
a lot of the digital applications MASCAR deeply participates in
needs already.
Speaker 3 (14:58):
Right So, whether it's.
Speaker 4 (15:01):
If you think about the digital wallets out there, they're enabled,
they're enabling a digital transaction, That digital transaction is secured,
and the comments happens on the MasterCard network as it
might do with Apple and things like that. We also
work on embedding our partnerships with these digital wallet providers.
(15:21):
So we've just announced that partnership with the Ali Barbe
Group about their wallets enabled to utilize our contact list
technology when the part when those consumers travel overseas. So
I think it's much more about saying that that innovation
and that mobile first centricity that happens in AP is
(15:43):
actually really important for us because that enables us to
find opportunities to collaborate and the trust and security that
comes with the MasterCard brand is a very very important
aspect of that. So where if you like, powering and
extending the reach of these wallet players, and we're also
(16:03):
providing that trust and reassurance. So we're definitely leaning into that.
And you know, we've grown up business substantially because of
our ability to partner with these digital players.
Speaker 1 (16:14):
We talk a lot these days about the revolution and
artificial intelligence, whether you're talking about a large language model
or the buildout of data centers, and I'm curious about
how MasterCard is embracing and using AI.
Speaker 4 (16:30):
Yeah, well, I mean, look, that's you know, that's a
great question, and you wouldn't be too surprised to know
that we've been doing AI already for a long time, right,
the original kind of machine learning kind of approaches that
we have been using to really power our network and
protect consumers on the fraud side, we've been doing that
fifteen sixteen years already. I think what's happening now is
(16:56):
in a region defined by speed, complexity, and digital, we're
really using data and AI to help transform the business,
so to really help commerce be smarter, safer, and more personal.
So that means that we do we already are building
on using this in fraud and scam protection, but we're
(17:18):
also working on at advanced analytics and personalization and everything
we do that really helps you provide the personalization that
consumers want today, but also help our bank partners merchants
that set navigate the complexity by bringing insights into action
(17:38):
and really navigate a dynamic environment with confidence. So we
sort of really talk about coming back to this point
about leveraging AI to make commerce safer, smarter, and more
personal And that's a good way.
Speaker 3 (17:52):
Of thinking about it because it's such a complex topic.
Speaker 1 (17:54):
So as we are speaking, looking at the price of bitcoin,
which is trading very near record highs, and I'm wondering
about the challenge that digital assets present your company, especially
given the fact that the blockchain technology is pretty revolutionary.
I don't know whether MasterCard has a similar type platform
that enables it to maybe compete more directly with digital assets.
(18:19):
Could you share some perspective on what MasterCard is feeling
right now as we see kind of this explosion, this
continued explosion in digital assets.
Speaker 3 (18:30):
Yeah.
Speaker 4 (18:30):
Look, I think the one thing that's really important is
to realize that massacred already has a significant number of
patients and distributed ledge of technology.
Speaker 3 (18:40):
Right, So we've been doing this for a long time.
So that's point number one.
Speaker 4 (18:43):
Point number two, we're really been working carefully to ensure
that we're partnering with crypto class but the crypto players
that really have the right degree of customer transparency protections,
making sure that they've got the right KOC and onboarding capabilities,
(19:04):
really with the ability to on ramp and off ramp
you transactions to ensure that people have these assets that
they can actually leverage the MasterCard network to release value
and actually transact.
Speaker 3 (19:19):
So I think that's the second thing.
Speaker 4 (19:20):
So we're partnering with the exchanges, with the right ones
that have the right standards for us and making sure
that you've got that trust and security layer.
Speaker 3 (19:30):
And then the third.
Speaker 4 (19:30):
Area we're really working is on the multi Tooken network,
you know what we call massacard r MTN, which is
really ensuring that we'll have the ability to support and
settlement into stable coins and things like that. So I
think that we're really directly already directly participating in this
space and ensuring that consumers have the utility that obviously,
(19:56):
you know, some of these digital assets don't have and
they can leverage the trust and security of the massacred
network to create that utility, but also carefully partnering to
make sure that we're actually upgrading our network to support
the ability to settle directly in stable coins atomically, which
also just raises the performance of our network. So we're
(20:19):
quite extensively partnering and enabling our systems to ensure that
we are definitely leading and ahead in this global transformation.
Speaker 1 (20:29):
Matthew will leave it there. Thank you so much for
visiting with us. Matthew Driver there. He is the executive
vice president for Services for the a Packet MasterCard. Joining
from Sydney here on the Daybreak Asia Podcast. Thanks for
listening to today's episode of the Bloomberg Daybreak Asia Edition podcast.
Each weekday, we look at the story shaping markets, finance,
(20:51):
and geopolitics in the Asia Pacific. You can find us
on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere
else you listen. Join us again tomorrow for insight on
the market moves from Hong Kong to Singapore and Australia.
I'm Doug Prisoner and this is Bloomberg
Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Bloomberg
day Break Asia podcast. I'm deg Krisner. The blistering run
in US equities kind of hit a wall on Thursday.
We had a spike in wholesale inflation and it kind
(00:21):
of caused markets to reduce bets on a FED rate
cut next month. Money markets now see about an eighty
five percent chance of a twenty five basis point rate
cut in September. That's after fully pricing in a rate
cut on Wednesday, and any notion of an outsized cut,
let's say fifty basis points, I think it's fair to
say that's been snuffed. And as we get set to
(00:43):
wrap up the week, we'll look at consumers in the
Asia Pacific. In a moment, I'll be joined by Matthew Driver.
He is executive vice president of services for the Apacket MasterCard.
But we begin here in the States, and as I mentioned,
US producer prices jumped into lie by the most in
three years, fueled by higher import cost as a result
(01:04):
of those tariffs. PPI month on month up nine tenths
of one percent, the annual rate three point three percent,
and services cost increased last month by one point one percent,
if you're wondering, that's the most we have seen since
March twenty twenty two. Joining me now is Mark Lushini.
He is the chief investment strategist at Janey Montgomery Scott.
(01:25):
Mark is on the line from Pittsburgh. It's good of
you to make time to chat with me. Let's talk
about this PPI print. What does it say about the
impact of tariffs on the economy.
Speaker 2 (01:37):
Well, then we're learning more as we get these data
releases that are beginning to show some signs of how
tariffs are manifesting in items that may ultimately feed into
the economy, either in the form of higher prices yet
to come, whether you call that attax or inflation, and
or the other side of it, and perhaps even the
(01:58):
darker side of it is to what degree it is
going to road consumer spending in a way that could
have a deleterious effect on economic activity.
Speaker 1 (02:06):
What about the extent to which it's going to begin
to compress margins. I'm sure for a person such as yourself,
that's got to be a concern most.
Speaker 2 (02:13):
Definitely, And we've heard a lot from companies here as
we're deep into the second quarter earning season about what
companies have done or attempted to strive to accomplish over
the last couple of months in terms of tariff mitigation measures,
and so for the most part, it hasn't really shown
up necessarily in the results, which so far in the
(02:34):
second quarter have been quite strong. But at the same time, though,
we know that some companies have stated that they are
going to be passing along costs, and to some degree
they have absorbed the cost. Now the proportion of which
is going to be either eaten by exporters and that
which is going to be eaten by importers and then
(02:57):
and we're passed along to consumers is still evolve. But
it would seem as though there's going to be some
margin pressure applied from these tarras that isn't going to
be able to fully pass along the consumers. That therefore
could have an impact on earnings as we go forward.
And given the rich valuations we have today in the
stock market, highly dependent upon not only positive economic activity
(03:20):
but the earnings growth that would be a bypartuct to that,
it's going to be very important to monitor as we
go deeper here into not only the third quarter, but
ultimately here from management in third quarter earning season.
Speaker 1 (03:35):
So today a number of economists were saying the report
is essentially a validation of the Fed's weight and see approach,
and the head of the FED Bank in Saint Louis,
Albertu Muslim was telling CNBC it's simply too early for
him to decide on whether to lower rates at next
month's FED meeting. Where are you in understanding what the
Fed may do, let's say, between now and the end
(03:57):
of the year.
Speaker 2 (03:58):
Well, certainly they're going to continue to be data dependent,
They've said as much, and so that leaves certainly before
their FMC meeting in mid September at least another CPI
print to come, another jobs report to come, and so
that and other obviously data in between. But importantly those
two will give further evidence as to what degree we
(04:21):
continue to see mounting price pressures coming from tariffs and
or obviously its impact on the job market, which is
in a somewhat delicate phosition as we speak, particularly given
the last print we had on jobs, which some have
suggested had the FED had that prior to their decision,
they may have already cut interest rates as a consequence.
(04:41):
So obviously, I think those two factors are going to
matter more than all the other data that, while be
interesting to note, will ultimately be the driver of the
Fed's decision as to whether they prioritize maintaining the job
market if it looks like it's stalling out, or conversely
combat inflation. If in fact, these price pressures appear to
(05:04):
be more than transitory, that could ultimately lead to some
unmooring of consumer expectations with regard to forward looking inflation prospects.
Speaker 1 (05:13):
I'm going to change gears. Today we learned that the
Trump administration is considering taking a stake in Intel. This
potential stake on the part of the government could support expansion.
We are told of Intel's domestic manufacturing. What is your
sense of the industrial policy that the Trump administration has
been rolling out. Do you think it's going to be
(05:35):
effective in certain areas? I know you're in Pittsburgh. We
just had a deal between Nipon Steel and US Steal.
The Trump administration was obviously involved in that, and I'm
wondering from your perspective whether you feel as though what
the Trump administration is putting forward in industrial policy will
have a material effect.
Speaker 2 (05:55):
Well I think it can have some positive benefits. I mean,
it's too soon to tell is going to happen between
the deal that was basically arranged by President Trump with
regards to Nippon Steel and US Steel, mostly to maintain
substantially all the operations in Pittsburgh as well as employment.
But at the same time, it is not necessarily unprecedented,
(06:19):
but rather uncommon to see this kind of industrial policy
being applied. We also saw it obviously with MP materials
relative to rare earth metals, and so this is kind
of a continuation of the same theme where there's the
strategic industries that President Trump and his administration have touted
our paramount to the success of the US and its
(06:41):
competitive state relative to other countries around the world, and
is trying to make specific surgical investments in industries and
or in companies in the case of Intel, which has
had some trouble from a financial standpoint, to perhaps meet
the obligation that it has committed to to underwrite the
(07:02):
facility in Ohio to produce semiconductors and the kind of
technological products that are necessary to once again keep the
US on the forefront of technology, but as well remain
competitive at a minimum on a global basis. So well,
you know, too soon to tell what may come of it,
but ultimately you would hope it would be a win win.
(07:23):
But it also invites a bit of a moral hazard,
which is to say, to what degree does this breed
an industrial policy that starts to actually impact the capitalistic uh,
you know, narrative that the US has embraced for so
many decades, if not centuries, relative to you know, the
interest of the companies and its shareholders and obviously its
(07:46):
ability to compete on a not only domestic but world
stage without heavy handed governmental influence. So it's obviously a
policy that everybody's watching closely. In the meantime, this is
just the latest example of something that's already know I've
been put forth in terms of MP materials and the
(08:09):
steel company's arrangements.
Speaker 1 (08:11):
So the equity market kind of stalled today. Nonetheless, the
S and P was able to extend a record high
nasdat comp very near to a record mark. Are you
still finding value in the equity market? I mean, we
could argue that, especially in the area of technology, some
of these valuations are pretty lofty.
Speaker 2 (08:29):
Well, it's more of a function of seeking relative value doug.
If you look at the S and P five hundred
in the aggregia as a capitalization weighted INDEXES trading it
called it roundly twenty two times forward earnings estimates, which
is on the richer side of where it's traded at
over say the last five years, which is closer to twenty,
(08:51):
or over the last ten, which is closer to eighteen
to nineteen. But you could say, well, given the concentration
in tech and tech adjacent companies, that's having a big
influence because their price earnings multiple is pulling up the
multiple the overall market. Again, the multiple for the Magnificent seven,
for instance, is approaching thirty times those same twelve month
(09:14):
forward earnings estimates. So what does that leave. That leaves
the S and P four hundred and ninety three. You
might say, well, they should be cheap or at least
offering good value, And there the answer is, relatively speaking,
yests trading it about nineteen times forward earnings as a group.
But at the same time, even then hardly an expensive
relative to you know, a typical market environment, which you
(09:36):
would expect, you know, sixteen or seventeen times forward earnings
for non tech related companies so I still think there's
an opportunity, particularly in the context of a market that
I still think is poised to continue to move higher
on the back of an economy that has perhaps experiencing
a bit of a soft patch, but I think has
(09:57):
some reason to believe is going to pick up a
bit of a tailwind as we get into the fourth
quarter of this year into twenty twenty six, particularly with
some of the provisions from the One Big Beautiful Bill Act.
And in addition to that, I think we've seen that
companies have done a pretty good job so far in
being able to handle the impact of tarrors by way
(10:19):
of all kinds of measures that they've taken to reorder
supply chains, seek operational efficiencies, and to some degree likely
to pass along some price hikes, but hopefully not so
much in the way that the consumer rolls over. But
collectively it leads me to believe that this market is
still very investable and buyable, because I expect higher prices
(10:41):
yet before the year is out.
Speaker 1 (10:42):
All right, Well leave it there, Mark, Thank you so
very much. Mark Lushini there. He is the chief investment
strategist at Cheney Montgomery Scott, joining from Pittsburgh here on
the Daybreak Asia podcast. Welcome back to the day Break
Asia Podcast. I'm Doug Chrisner. This morning in Asia, markets
(11:04):
are focused on the readings for Chinese retail sales and
industrial production. I think it's fair to say that recent
measures by Beijing to strengthen consumption reflect a growing recognition
of domestic demands pivotal role. Let's take a closer look
now at the consumer across the Asia Pacific. Joining me
now is Matthew Driver. He is the executive vice president
(11:25):
for Services in the APAC at MasterCard. Matthew is on
the line from Sydney. Matthew, thank you so much for
making time to chat with me. I know consumers across
the Asia Pacific are as varied as the economies themselves. Japan,
for example, is dealing with levels of inflation it hasn't
seen in decades. Other countries, as we know, are dealing
(11:45):
with very very different dynamics. But I'm hoping you can
speak to the overall level of consumer spending that you're
seeing across the APEC. What is it right now?
Speaker 3 (11:56):
Yeah?
Speaker 4 (11:56):
Sure, look, I think and thanks for hosting and having
me on the show. Look, despite the macro economic concertainty.
You know, consumer spending across a pack remains healthy. I
think that's driven by a couple of factors that are important.
You've really got low unemployment, You've had a decent amount
of real wage growth, and that's really helped to essentially
(12:18):
ensure that you've got demand across segments. I think our
Economics Institute forecast steady GDP growth.
Speaker 3 (12:25):
So what we are seeing is broad based. You know,
is the customer is pretty resilient.
Speaker 4 (12:30):
There's been a little bit of stress in some places
as rates have been higher for longer, but you have
to think about there are also some longer term drivers
that are going to be quite positive. Right. You've seen
interest rates are starting to come down number one. Number twos,
You've got some easing of fuel prices.
Speaker 3 (12:48):
That's point number two.
Speaker 4 (12:49):
And point number three is you know, goods continue to
be cheap. China's leaning into the region and so that's helping,
you know, on the value side as well.
Speaker 1 (12:58):
Do you have a sense of whether US tariff policy
has adversely impacted consumer sentiment in the region.
Speaker 4 (13:07):
Look, I think that you know, we're really trying to
think through you know, the impact of you know, towerists,
I think, look, it's a complicated environment, but look aga
specific continues to navigate that there are going to be
some alterations and adjustments. But also I think while those
dynamics post some challenges, they also understood that the region
(13:28):
is very resilient and adaptable, right. I think that post COVID,
some of the supply chains have become pretty flexible.
Speaker 3 (13:36):
That's been very very important.
Speaker 4 (13:38):
And while territs have raised input you know, import costs
to a certain degree and more price sensitive markets, there's
been you know, trying to I guess adjust you know,
consumer spending has been a little bit of value shifting,
like we talked about. But what we're really trying to
do is make sure that you know, we're helping our
(13:59):
customers navigate that with insights and intelligence. So I think
that despite some of that uncertainty, people are probably putting
off some of the longer term transactions, right, They're really
focusing on how do they enswer that they're driving value today,
shifting those patterns of spend a little bit. And so
with that in mind, and the fact, as I mentioned earlier,
(14:21):
we are seeing pretty steady demand and that's really reflecting
the resilience of the consumer overall.
Speaker 1 (14:28):
So I'm wondering about the challenges that MasterCard may be
facing right now, especially among the younger generations who may
prefer digital apps rather than the use of a credit card.
I mean, are you seeing the impact of that? Has
that presented something that you've had to address pretty specifically?
Speaker 4 (14:47):
Well, I think what you've got to realize is that
a lot of the digital applications MASCAR deeply participates in
needs already.
Speaker 3 (14:58):
Right So, whether it's.
Speaker 4 (15:01):
If you think about the digital wallets out there, they're enabled,
they're enabling a digital transaction, That digital transaction is secured,
and the comments happens on the MasterCard network as it
might do with Apple and things like that. We also
work on embedding our partnerships with these digital wallet providers.
(15:21):
So we've just announced that partnership with the Ali Barbe
Group about their wallets enabled to utilize our contact list
technology when the part when those consumers travel overseas. So
I think it's much more about saying that that innovation
and that mobile first centricity that happens in AP is
(15:43):
actually really important for us because that enables us to
find opportunities to collaborate and the trust and security that
comes with the MasterCard brand is a very very important
aspect of that. So where if you like, powering and
extending the reach of these wallet players, and we're also
(16:03):
providing that trust and reassurance. So we're definitely leaning into that.
And you know, we've grown up business substantially because of
our ability to partner with these digital players.
Speaker 1 (16:14):
We talk a lot these days about the revolution and
artificial intelligence, whether you're talking about a large language model
or the buildout of data centers, and I'm curious about
how MasterCard is embracing and using AI.
Speaker 4 (16:30):
Yeah, well, I mean, look, that's you know, that's a
great question, and you wouldn't be too surprised to know
that we've been doing AI already for a long time, right,
the original kind of machine learning kind of approaches that
we have been using to really power our network and
protect consumers on the fraud side, we've been doing that
fifteen sixteen years already. I think what's happening now is
(16:56):
in a region defined by speed, complexity, and digital, we're
really using data and AI to help transform the business,
so to really help commerce be smarter, safer, and more personal.
So that means that we do we already are building
on using this in fraud and scam protection, but we're
(17:18):
also working on at advanced analytics and personalization and everything
we do that really helps you provide the personalization that
consumers want today, but also help our bank partners merchants
that set navigate the complexity by bringing insights into action
(17:38):
and really navigate a dynamic environment with confidence. So we
sort of really talk about coming back to this point
about leveraging AI to make commerce safer, smarter, and more
personal And that's a good way.
Speaker 3 (17:52):
Of thinking about it because it's such a complex topic.
Speaker 1 (17:54):
So as we are speaking, looking at the price of bitcoin,
which is trading very near record highs, and I'm wondering
about the challenge that digital assets present your company, especially
given the fact that the blockchain technology is pretty revolutionary.
I don't know whether MasterCard has a similar type platform
that enables it to maybe compete more directly with digital assets.
(18:19):
Could you share some perspective on what MasterCard is feeling
right now as we see kind of this explosion, this
continued explosion in digital assets.
Speaker 3 (18:30):
Yeah.
Speaker 4 (18:30):
Look, I think the one thing that's really important is
to realize that massacred already has a significant number of
patients and distributed ledge of technology.
Speaker 3 (18:40):
Right, So we've been doing this for a long time.
So that's point number one.
Speaker 4 (18:43):
Point number two, we're really been working carefully to ensure
that we're partnering with crypto class but the crypto players
that really have the right degree of customer transparency protections,
making sure that they've got the right KOC and onboarding capabilities,
(19:04):
really with the ability to on ramp and off ramp
you transactions to ensure that people have these assets that
they can actually leverage the MasterCard network to release value
and actually transact.
Speaker 3 (19:19):
So I think that's the second thing.
Speaker 4 (19:20):
So we're partnering with the exchanges, with the right ones
that have the right standards for us and making sure
that you've got that trust and security layer.
Speaker 3 (19:30):
And then the third.
Speaker 4 (19:30):
Area we're really working is on the multi Tooken network,
you know what we call massacard r MTN, which is
really ensuring that we'll have the ability to support and
settlement into stable coins and things like that. So I
think that we're really directly already directly participating in this
space and ensuring that consumers have the utility that obviously,
(19:56):
you know, some of these digital assets don't have and
they can leverage the trust and security of the massacred
network to create that utility, but also carefully partnering to
make sure that we're actually upgrading our network to support
the ability to settle directly in stable coins atomically, which
also just raises the performance of our network. So we're
(20:19):
quite extensively partnering and enabling our systems to ensure that
we are definitely leading and ahead in this global transformation.
Speaker 1 (20:29):
Matthew will leave it there. Thank you so much for
visiting with us. Matthew Driver there. He is the executive
vice president for Services for the a Packet MasterCard. Joining
from Sydney here on the Daybreak Asia Podcast. Thanks for
listening to today's episode of the Bloomberg Daybreak Asia Edition podcast.
Each weekday, we look at the story shaping markets, finance,
(20:51):
and geopolitics in the Asia Pacific. You can find us
on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere
else you listen. Join us again tomorrow for insight on
the market moves from Hong Kong to Singapore and Australia.
I'm Doug Prisoner and this is Bloomberg
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
My Favorite Murder with Karen Kilgariff and Georgia Hardstark
My Favorite Murder is a true crime comedy podcast hosted by Karen Kilgariff and Georgia Hardstark. Each week, Karen and Georgia share compelling true crimes and hometown stories from friends and listeners. Since MFM launched in January of 2016, Karen and Georgia have shared their lifelong interest in true crime and have covered stories of infamous serial killers like the Night Stalker, mysterious cold cases, captivating cults, incredible survivor stories and important events from history like the Tulsa race massacre of 1921. My Favorite Murder is part of the Exactly Right podcast network that provides a platform for bold, creative voices to bring to life provocative, entertaining and relatable stories for audiences everywhere. The Exactly Right roster of podcasts covers a variety of topics including historic true crime, comedic interviews and news, science, pop culture and more. Podcasts on the network include Buried Bones with Kate Winkler Dawson and Paul Holes, That's Messed Up: An SVU Podcast, This Podcast Will Kill You, Bananas and more.
The Joe Rogan Experience
The official podcast of comedian Joe Rogan.